House for Sale

There is a house for sale down the street from us, and we happen to know exactly when they bought it and what they paid. They bought about a month before we did.

January 2007 - bought for $282k + $1.5k lawyer fees + $1.5k land transfer tax = $285k.

October 2008 - asking $308k. Now add $15k (5%) for realtor fees and $1.5k for the lawyer (again) and you get a max selling price of $291.5k. Let's assume a full 2 years to make the math a bit easier.

If (and that's a BIG if, likely a no) they get their full asking price, then the finances are as follows:

291.5/285 = 1.02281 = about 2.3%. In two years. So 1.1% increase a year.

Now let's say they had a mortgage for 80% of the principle at 5%. In the first year, they would have paid a bit over $11k in interest alone. The second year almost the same. They also would have paid about $2.5k in property taxes each year.

So by living in this house for 2 years and assuming they get the full price they are asking, they will have paid out about $27k in interest and taxes and gained about $6.5k in appreciation. Total loss:

$20.5k

Ouch ouch ouch. Sucks to buy and sell that quickly. And this number will only grow [worse] because the market is terrible right now and they will NOT get their full asking price.

Although, to be fair, that's likely still less than they would have lost by paying rent. Rent for a house of similar size would be in the $1600 per month range, or about $38400 for this 2 year period. Lots more freedom though.